Court: Stolen Mexican oil sold to German Corp.

MEXICO CITY — A Texas oil executive says his small company was one of several that bought millions of dollars worth of stolen Mexican petroleum and then sold the illicit products to larger U.S. companies including chemical giant BASF.

Houston-based Trammo Petroleum president Donald Schroeder, the first to be convicted as part of a cross-border investigation, testified that he was contacted by two fuel company representatives who “told me they had some Mexican condensate that they would like to sell,” according to U.S. federal court transcripts obtained Friday by The Associated Press.

Schroeder testified that his contact at Continental Fuels Inc. was Josh Crescenzi, who worked for the 2004 re-election campaign of President George W. Bush and for the Republican National Party in 2004 and 2006, according to campaign finance records.

Crescenzi said “that the condensate was stolen,” Schroeder testified during a May 2009 court appearance.

“And, so what did you do about it?” Judge Ewing Werlein said.

“I bought it and sold it,” answered Schroeder, pleading guilty to buying and reselling stolen condensate, a liquid hydrocarbon that refiners can blend with crude oil as they produce fuel and other products.

Schroeder and his attorneys have repeatedly declined to comment, and Crescenzi could not immediately be reached.

Schroeder is the first to be convicted as part of a cross-border investigation that began when Mexican state oil company Petroleos Mexicanos, or Pemex, contacted U.S. Immigration and Customs Enforcement in 2007 to report their suspicions that their products were being smuggled into the U.S.

BASF spokesman Daniel Pepitone says his company received a U.S. Justice Department subpoena related to the case, and they are cooperating with authorities. He confirmed that BASF did business with Trammo Petroleum, and said that “we have no reason to believe that BASF had any involvement in the alleged wrongdoing.”

Joel Androphy, the lawyer for Murphy Energy Corp., said Murphy didn’t commit any crimes.

“If anything we’ve been victimized, clearly,” he said. “The leaks that go on, it’s pretty unfair to start leaking information about innocent parties here.”

Pemex has been struggling for years to quell a seemingly endless series of taps on its pipelines by thieves increasingly associated with Mexico’s violent drug cartels. Pemex is the only legal owner and exporter of condensate into the U.S. from Mexico, but ICE investigators found other U.S. brokers were in on the deals, according to the transcripts.

Here’s how they did it: Various unnamed companies drove the stolen Mexican oil in tankers across the U.S. border, delivering their illicit loads to the port of Brownsville, Texas. Continental paid with a series of wire transfers, then stored the oil in tanks until there was enough to load on a barge, which then embarked for Port Arthur, Texas, and ultimately sold to BASF, according to the records from the U.S. district court in Houston.

Even though they never handled the condensate, Murphy and Trammo bought the stolen oil during this process, the court records say.

Schroeder has been ordered to pay a $2 million fine to the U.S. government while he awaits a December sentencing, and U.S. officials have returned a separate $2.4 million refund check from Trammo to partially compensate Pemex for its losses.

AP Energy Writer Chris Kahn in New York and AP Staff Writer Sharon Theimer in Washington D.C. contributed to this report.